Productive inclusion able to transform situations of poverty and inequality

Different types of productive inclusion exist: while some help ameliorate but do not solve poverty situations and even less inequality, others are able to address with diverse success rate those situations.

Poverty and inequality situations require to be approached from the level of public policies that define the systemic course and the country’s way of functioning, as well as from the level of direct support to popular sectors (among others: small and micro producers of manufacturing, services, family agriculture, occasional workers, unregistered labor and unemployed). That encounter between public policies, regulations, and direct supports to popular sectors is indispensable to address with some success poverty and inequality situations and, from there, decisively contribute towards a sustainable development with less social tensions. Macroeconomic measures would fall into a popular context that might not have the capacity to seize them if they are not complemented by direct support towards generating the ability to access the stimuli and opportunities that are offered. At the same time, the direct support to the base might end up being futile or with minimal effects if it were not deployed within a favorable macro context that would encourage and enable its development.

In previous articles of Opinion Sur, we have analyzed public policies oriented towards generating an inclusive development, emphasizing the need for eliminating value appropriation mechanisms that are used by a minority abusing its market power [1]. In the following lines, we will focus on different options for direct support to the base of a country’s productive apparatus; those people and ventures that struggle to subsist in a context of acute scarcity of every type of productive resources: capital, technology, management, information, contacts, market access, retention of generated value, insertion into promissory productive chains.

Types of direct support to popular sectors

There are diverse ways to directly support the base of the productive system, such as microcredit programs, those that promote individual entrepreneurship, and those that aim at establishing inclusive ventures with transforming potential

(i) Microcredit

Microcredit, even more if it is part of a larger microfinance ensemble, is an important element in any strategy that seeks to help small producers. They contribute their part regardless the possibility that they can always be improved and that some occasional failures might happen in badly conceived or poorly managed programs. Microfinance programs irrigate popular sectors with credit and other financial services; but it is also worth noting what they cannot accomplish if they act in isolation, that is the limitations that are inherent to them on which it is worth working to boost its efforts [2] .

The sustainability of a micro or small producer is not ensured just by solving his access to credit and other financial services; he needs to have access to excellence knowledge, commercial information, contacts, modern business engineering, better articulation with other economic actors within promissory productive networks and, on top of that, relying on a favorable macroeconomic context. Some microcredit programs have experimented with more comprehensive approaches but there is still plenty of work to do. It is not about adding responsibilities to microfinance entities but rather trying to develop synergies with organizations specialized in repositioning micro and small producers in more promissory productive networks than those they tend to be part of. We have analyzed which could be those organizations, what catalytic effects they might generate, and which could be the role of microfinance entities in such initiatives [3].

(ii) Individual entrepreneurship

Even if there is a constant emergence of generation after generation of entrepreneurs, usually only a fraction of that universe manages to get good results, those that have some critical factors needed to structure, launch, and consolidate good productive ventures or, alternatively or complementarily, those who manage to demonstrate the sufficient potential to get angel investors interested in providing startup support. The actions of these investors are very limited, in the first place, because they do not abound in our countries and also because they can only analyze twenty something candidates to select just a few they consider promissory. They “skim” what they consider the best prospects from the reduced spaces they get to know, giving them support in terms of contacts, management, financing, legal matters, and so on. The rest, the huge majority of producers, is ignored or they just access entrepreneurship training programs but do not receive the other critical necessary supports [4].

It is worth noting that, with some exceptions, there are no comprehensive support systems in our countries to assist small and medium size producers that might include specialized investment funds besides management advice. It is a slowly changing reality but that still cannot be compared to such that exists in other latitudes.

(iii) Inclusive ventures with transforming potential

Sometimes due to external imposition, others because our minds have been colonized, there is a single prevailing way of conceiving and practicing entrepreneurship development. It is as if we would force entrepreneurship creativity and the diversity of answers that exist when addressing always singular situations, to subordinate themselves to the hegemonic approach to be validated. This bias undermines a wide range of other possible solutions, imposing approaches that are frequently presented as unique truths, even though in practice they do not succeed in answering some of the most critical contemporary challenges.

Today, entrepreneurship development goes beyond the individualistic model even though this last one can still be useful for a fraction of the entrepreneurship universe. To mobilize and integrate vast popular sectors there are other entrepreneurship strategies, such as, popular base franchises [5], workers-run corporations, cooperative holdings, suppliers associations, peoples’ marketing facilities (including concentration markets, permanent and itinerant fairs, community supermarkets), locomotive agro-industries, service centers for small family ventures, export and import consortia.

All these types of entrepreneurship development constitute economic ventures with transforming potential. Despite having their own identities, generally they try to integrate dispersed small producers into medium-size productive units, associating them in terms of management and ownership with selected strategic partners. They also promote the participation of private and public actors as well as scientific, social, and development organizations in boards of directors or in advisory councils to benefit from their expertise and support [6].

Broad-base strategies

In light of the vast universe of micro and small producers that exists in our countries and that in general receive none or little support, it is imperative to adopt broad-base promotional strategies. All efforts that can be mobilized should be welcomed and this includes microcredit programs as well as those that promote individual entrepreneurship; there is no need in denying all that they contribute. Neither should their limitations be ignored: microcredit programs, though massive, need to be part of more comprehensive efforts to enhance their effectiveness; the promotion of extremely selective promissory entrepreneurs, though effective for the small group of favored ventures, has a limited scope of reduced macroeconomic impact. Both types of programs contribute to reducing poverty for those ones that participate in them but not much to lower the inequality that punishes our countries: in the case of microcredit because the increase in incomes they generate in popular sectors is far smaller than the constant increase in incomes obtained by the most powerful actors in the economic system. Inequality might be reduced only if monetary incomes that are fostered by microcredit together with the non-monetary ones provided by the State with better education, health, housing, social security, environmental protection, and so on, were larger than those obtained by the 1% of privileged sectors. In the case of selective entrepreneurship, its reduced scale solves the inequality situation for the small number of favored ones, generally just a few from popular sectors, but practically with no incidence at all in terms of inequality at the level of society as a whole.

Today, entrepreneurs that do not receive managerial and financial assistance end up relegated to occupying non promissory marginal spaces. As aforementioned, conventional entrepreneurship development is focused on “skimming” a generally small number of initiatives; aside are left large popular sectors with their urgencies, cravings, needs but also with their talent and realization ability. Therefore, contemporary entrepreneurship’s most meaningful challenge focuses on supporting the inclusion of popular sectors in medium-size ventures with transforming potential that can be integrated into productive networks in promissory sectors.

This requires scale and, at the same time, decentralization of interventions; it forces a massive action of wide territorial scope with public-private participation as well as social and development organizations, plus particular treatments according to the specificities of each situation [7] . It is ineffective to try homogenizing answers as they harshly restrict the innovation and creativity of local talent.

It is an absolute priority to establish support systems for a transforming entrepreneurship oriented towards a full social and productive inclusion of popular sectors [8]. Their praxis will have a direct impact on territorial and social inequality, internal supply, inflationary pressures, local reinvestment of profits, a larger value added in the productive matrix and a more open local power structure.